Pricing pitfalls

A - Maximizing Home Sale Profit: What's the standard approach?

Surprisingly, less profit often comes from asking too much. It seems counterintuitive: if I ask more, then I should get more, right? But this is not what happens. The following scenario takes place all of the time. 

The same old story:

Let’s say you did some homework and came up with a “good” asking price, or you think the agents’ recommendations are low so you bump up the asking price to where you think it should be. You figure you can always come down if the price is too high.

You may get some good action at your open house, but no offers. After a few weeks you drop your asking price a little. You wait. Then crunch time comes and you get nervous. Your new house is nearing completion, you want to get the kids settled into the new school or you found your dream home to buy–any number of reasons to sell fast.

You drop your price again, to a point below where you should have started. The house becomes stale on the market and your enthusiasm wanes. Well you can kiss your higher sales price goodbye. 

Move to plan B:

Eventually, you just want to get it over with and move on with your life. You may have gotten lots of lookers, but you have become discouraged enough to call your local realty company. The agent looks you squarely in the eye and says, “You tested the market with your price, so let’s price it where we can get it sold.”

This price is often below the original recommended price because, unfortunately, time constraints have reshaped your motivations.

What happens now if housing turnover slows due to variables like the economy, summer vacations and seasonal factors? These are things that can force you to quickly drop your new asking price below the selling price you had expected. And, to add insult to injury, you also have to pay a commission. Once again we see that setting too high a price does not translate into a maximize profit for the sale of your house. 

                                Slow market

Surprisingly, most owners will simply not heed this advice (especially the FSBO) and overprice their home–even in today’s market. This is the time to sharpen your pencil. Set a realistic price. It’s a sure way to make your home attractive to the limited number of buyers.

Setting your price too low:

Some agents may try to convince you to price your home below value. They’ll point out that you will receive multiple offers that will drive the price above market value. This can work in a hot sellers’ market.

You can’t count on multiple offers in a cool market. Normally, when an offer is made, the buyers will give you a limited period (usually 24 hours or less) in which to respond to their offer. Buyers know that if you aren’t given a limited time to respond, you’ll either sit on it waiting for other offers or use it to shop for a better offer.